PowerPoint PresentationChapter 1 Managing the Digital Firm
Explain why information systems are so important today for business and management
Evaluate the role of information systems in today’s competitive business environment
Assess the impact of the Internet and Internet technology on business and government
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© 2006 by Prentice Hall
Define an information system from both a technical and business perspective and distinguish between computer literacy and information systems literacy
Identify the major management challenges to building and using information systems
OBJECTIVES (Continued)
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Solutions: Integrated Volume Planning System connects demand side of business with suppliers, reducing inventories.
Powerway helps 3,400 suppliers track parts and quality, reducing errors.
Demonstrates IT’s role in operational excellence, better quality products, and agility–time to market
Illustrates the emerging digital firm landscape where information can flow seamlessly among business partners to create a superior customer experience
Management Information Systems
DaimlerChrysler Case
Capital management
Strategic opportunity and advantage
Why Information Systems Matter
There are four reasons why IT makes a difference to the success of a business:
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Chapter 1 Managing the Digital Firm
IT is the largest single component of capital investment in the United States.
About $1.8 trillion is spent each year by American businesses.
Managers and business students need to know how to invest this capital wisely.
The success of your business in the future may well depend on how you make IT investment decisions.
Capital Management:
Information Technology Capital Investment
WHY INFORMATION SYSTEMS?
Source: Based on the data in U.S. Department of Commerce, Bureau of Economic Analysis, National Income and Product Accounts, Tables 5.2 and 5.8, 2004.
Figure 1-1
Chapter 1 Managing the Digital Firm
Most businesses today could not operate without extensive use of information systems and technologies.
IT can increase market share.
IT can help a business become a high-quality,
low-cost producer.
Foundation of doing business:
The Interdependence between Organizations and
Information Systems
Chapter 1 Managing the Digital Firm
IT is one of the most important tools managers have to increase productivity and efficiency of businesses.
According to the Federal Reserve Bank, IT has reduced the rate of inflation by 0.5 to 1% in the last decade. For firms this means IT is a major factor in reducing costs.
It is estimated that IT has increased productivity in the economy by about 1% in the last decade. For firms this means IT is a major source of labor and capital efficiency.
WHY INFORMATION SYSTEMS?
Create competitive advantage: IT makes it possible to develop competitive advantages.
New Business Models: Dell Computer has built its competitive advantage on an IT enabled build-to-order business model that other firms have not been able to imitate.
WHY INFORMATION SYSTEMS?
Chapter 1 Managing the Digital Firm
Create new services: eBay has developed the largest auction trading platform for millions of individuals and businesses. Competitors have not been able to imitate its success.
Differentiate yourself from your competitors: Amazon has become the largest book retailer in the United States on the strength of its huge online inventory and recommender system. It has no rivals in size and scope.
WHY INFORMATION SYSTEMS?
Chapter 1 Managing the Digital Firm
Carr has written that whatever advantages firms build using IT can be easily copied by competitors.
This view is not supported by the evidence: Amazon, eBay, Dell, Wal-Mart and Apple's iTunes are just a few firms that have built and maintained technology-based advantages.
How Much Does IT Matter?
WHY INFORMATION SYSTEMS?
Chapter 1 Managing the Digital Firm
Commoditization of technology is typically a spur to innovation and new business models, products and services.
Competitive advantage derives not from the technology, but on how businesses use the technology.
Innovations in business processes, management and organization are not easily copied from one firm to another.
How Much Does IT Matter?
WHY INFORMATION SYSTEMS?
Internet growth and technology convergence
Transformation of the business enterprise
Why IT Now? Digital Convergence and the Changing Business Environment
Growing impact of IT in business firms can be
assessed from the following five factors:
WHY INFORMATION SYSTEMS?
Emergence of the digital firm
WHY INFORMATION SYSTEMS?
Why IT Now? Digital Convergence and the Changing Business Environment (Continued)
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Chapter 1 Managing the Digital Firm
Growth of the Internet: 120 million online in the United States, 500 million global users
The Internet is bringing about a convergence of telecommunications and computing: VoIP telephones.
WHY INFORMATION SYSTEMS?
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Chapter 1 Managing the Digital Firm
Growth in e-business, e-commerce, and e-government
Internet is bringing about rapid changes in markets and market structure: financial services and banking such as eTrade.com.
The Internet is making many traditional business models obsolete: the corner music store and video store.
WHY INFORMATION SYSTEMS?
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Flattening
Decentralization
Flexibility
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Location independence
Empowerment
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Management and control in a global marketplace
Competition in world markets
Knowledge and information-based economies
New products and services
WHY INFORMATION SYSTEMS?
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Time-based competition
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WHY INFORMATION SYSTEMS?
Source: U.S. Department of Commerce, Bureau of the Census, Statistical Abstract of the United States, 2003, Table 615; and Historical Statistics of the United States, Colonial Times to 1970, Vol. 1, Series D, pp. 182-232.
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Digitally enabled relationships with customers, suppliers, and employees
Core business processes accomplished using digital networks
Digital management of key corporate assets
WHY INFORMATION SYSTEMS?
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Agile sensing and responding to environmental changes
Seamless flow of information within the firm, and with strategic partners
WHY INFORMATION SYSTEMS?
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The Emerging Digital Firm
What Is an Information System?
Technology perspective: A set of interrelated components that collect (or retrieve), process, store, and distribute information to support decision making and control in an organization
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Chapter 1 Managing the Digital Firm
What is an Information System? (Continued)
Data: Streams of raw facts representing events such as business transactions
Information: Clusters of facts meaningful and useful to human beings in the processes such as making decisions
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Data and Information
Functions of an Information System
Figure 1-6
Processing and disseminating information
Collecting, storing, and using information
PERSPECTIVES ON INFORMATION SYSTEMS
Computer-Based Information System (CBIS)
 
Information systems are more than just technology.
Businesses invest in IS in order to create value and increase profitability.
A Business Perspective on Information Systems
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Based on information technology but also require significant investment in organizational and management changes and innovations
IS create value primarily by changing business processes and management decision making.
PERSPECTIVES ON INFORMATION SYSTEMS
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The Business Information Value Chain
Figure 1-7
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Information systems literacy: Broad-based understanding of information systems that includes behavioral knowledge about organizations, management and individuals using information systems as well as technical knowledge about computers
Computer literacy: Knowledge about information technology, focusing on understanding how computer technologies work
 
Sales and marketing
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Organizations
Managers
Technology
PERSPECTIVES ON INFORMATION SYSTEMS
You will need to understand and balance these dimensions of information systems in order to create business value.
Dimensions of Information Systems
People
Structure
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Managers are:
Sense makers
Decision makers
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PERSPECTIVES ON INFORMATION SYSTEMS
(Continued)
Managers who can understand the role of information systems in creating business value are the key ingredient to success with systems, and cannot easily be replicated by your competitors.
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Hardware: Physical equipment
PERSPECTIVES ON INFORMATION SYSTEMS
Information technology is one of the tools managers use to cope with change:
The Technology Dimension of Information Systems
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Communications technology: Transfers data from one physical location to another
Networks: Links computers to share data or resources
PERSPECTIVES ON INFORMATION SYSTEMS
The Technology Dimension of Information Systems (Continued)
Managers need to know enough about information technology to make intelligent decisions about how to use it for creating business value.
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Complementary assets:
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Supportive business culture that values efficiency and effectiveness
Efficient business processes, decentralization of authority
Highly distributed decision rights
PERSPECTIVES ON INFORMATION SYSTEMS
Variation in Returns on Information Technology Investment
Source: Based on Erik Brynjolfsson and Lorin M. Hitt, “Beyond Computation: Information Technology, Organizational Transformation and Business Performance.” Journal of Economic Perspectives 14, no. 4 (Fall 2000). Used with permission of the American Economic Association.
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Management Information Systems
Sociotechnical Systems
Organizations mutually adjust to one another until fit is satisfactory
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Management Information Systems
Figure 1-11